At this particular time of year you will need to be cautious about the ex-dividends date of any particular mutual funds you are planning to purchase. If you are one that will take kindly to this advice you will avoid a trouble investment trap lying in wait. On that particular day of the ex-dividends day all of the mutual fund owners that are registered are eligible for capital gains distribution.
If it is a case where you do not claim the fund by that date it will be paid to you. Another thing to keep in your mind is the distribution date, anytime after this date you can purchase your shares without the hassle of the net asset value. Between the period of October onwards into December most of the various mutual funds declare their gain on distributions capital gains and also dividends. If it is stock you want to buy you will have no problem doing so. These kinds of distributions do not affect the level of the share price, but if you have mutual funds you will need to think about the distribution impact or share value.
On the day of distribution you will realize that the mutual funds have dropped to level up with the price of the dollar on that day. In the industry this would be called buying dividends, the way how it works is that the funds collected from all the assets sold is added up and reinvested by the fund manager. At the end of the particular year 95% of funds will have to be distributed to capital gains and not reinvested.
Colin Scott is a taxation specialist. For more great tips on real estate investments visit http://www.AvoidingCapitalGains.net/.
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